Shadduck 1

Grant Shadduck

Instructor: Malcom Campbell

English 1104

April 5, 2017

Minimum Wage, Minimal Opportunity?

When people say, money is not the most important thing in life, I do not entirely agree.

You may ask why?, but let me paint a picture to help explain myself. In no way am I saying

that you need money to be happy, however that is beside the point. Without money, many people

struggle to support themselves and their families. Things that many of us take for granted: Food,

a car, even a place to call home, others must make hard decisions about. But, what if we, as a

nation could help some find relief when it comes to financial stability? Would you say, Why

not, lets do it? That answer is what leads many Americans to support raising the federal

minimum wage. However, as with any argument, there is an opposition. The question is, should

the United States raise the federal minimum wage? Or will raising it further hurt our economy?

The impact of minimum wage is all around us. Many of us spent our teenage summers

working for minimum wage. Even if you have never had a minimum wage job, your daily life is

most likely supported by people who work for minimum wage. Where does your morning coffee

come from? How about the person working the register at your favorite restaurant? It is highly

likely that they all make minimum wage. But, so what? They seem to be doing alright, right?

Some may be doing alright, some may even be doing well, however there are hundreds of

thousands of Americans struggling to make ends meet on minimum wage.

 Shadduck 2

Take Crystal Dupont for example: a Houston woman who even while working 30 to 40

hours a week still only brings home around $15,000 annually. With no health insurance, Crystal

has not been to a doctor in years. After graduating high school in 2006, Dupont moved out of her

family home and got a job. Like many others, she soon concluded that it is almost impossible to

live on her own. The now 25-year-old, is living on food stamps, her mothers disability benefits,

and whatever she can bring home from her full-time job (Linn, By the Grace of God). Many

ask, how can this happen? How can a woman who works almost 40 hours a week barely get by?

I too, agree that this should not be the case. Yet, the issue is much more complex than just

increasing the federal minimum wage. The economy could be affected by the raising of the

minimum wage.

Those in support of an increase in the federal minimum wage have numerous reasons to

suggest that an increase is needed. The last time the federal minimum wage was raised was back

in 2009 (Soergel, Pay Wars). A lot has happened since 2009. The economy has bounced back

from the Great Recession and inflation has continued to affect the buying power of $7.25.

Something as simple as a gallon of milk has drastically increased over the past few years. In

2009 a gallon of milk cost $3.11. Compare this to 2014, when the same product would cost on

average $3.82 (U.S. average price of milk). Although this may not seem like a big deal, it is

not just milk. The buying power of $7.25 is not the same as it was when it was implemented in

2009. Many Americans believe that federal minimum wage should be increased to adjust for

inflation. Congressional democrats have proposed a bill to raise the federal minimum wage to

$10.10 an hour, helping fight inflation. The bill was supported by former President Obama. More

recently, democrats proposed a bill to raise minimum wage to $12 an hour by 2020

(Kasperkevic, Congress to Propose Bill).

 Shadduck 3

The Fight for $15.

Many, however, are pushing for an increase even above $12 an hour. The national

movement aptly named the fight for $15 believes that the minimum wage should be $15 an

hour. Some states, like California have approved bills to gradually increase minimum wage until

it reaches $15 an hour. The proposed bill has the final deadline as 2022 (Gibson, Will Raising

the Minimum Wage).

Similarly, many argue that the employment rate is not threatened by a minimum wage

increase. Supporting this claim is a 1995 research study that studied more than 400 restaurants in

New Jersey and Pennsylvania. The study compared the employment rates between the two states

after New Jersey increased minimum wage from $4.25 to $5.05. They concluded that there is no

indication that the rise in the minimum wage reduced employment." (Gibson, Will Raising the

Minimum Wage).

However, there is a strong counterargument: the study is focused on a change of around

17%. However, to reach the $15 an hour benchmark, minimum wage would be increasing by

almost 70%. Even if you spread that increase over several years, it is still more than the study at

hand. It is for this reason that I believe that the study may not be representative of an increase

$15 an hour.

The public cost.

Another argument for an increase in wages is the public cost of low-wage workers. A

study published by the University of California, Berkleys labor center cites The cost of public

assistance to families of workers in the fast-food industry is nearly $7 billion per year.

(Allegretto et al.). In addition, more than half of these low-wage workers are in one or more

public assistance programs. These programs include, food stamps, Medicaid, and Earned Income
 Shadduck 4

Tax Credit (Allegretto et al.). The argument is that if minimum wages were to increase, some of

these low-income workers would be able to support themselves without federal assistance. In my

opinion, this is one of the strongest arguments for an increase in minimum wage. If things were

to work as suggested, it would be beneficial for everyone, not just the low-income workers.

Instead of billions of tax dollars going to public assistance, some of the money saved could be

allocated to other places.

Those who oppose raising the federal minimum wage typically cite job loss as the largest

concern. This job loss leads me to fear raising the federal minimum wage. If the unemployment

rate were to increase because of an increase in minimum wage, it would almost be

counterproductive. The people who were struggling to make ends meet with an income would no

longer have that to support themselves. How would someone like Crystal Dupont survive if she

were to lose the little income she had? That said, this concern is completely valid. There are

multiple ways that an increase in minimum wage could likely lead to job loss.

Automation takes over.

To many economists, a threat to employment rates is the implementation of automation in

businesses. If you have been to Panera Bread recently, you may have noticed along the wall a

few IPads where you could avoid interpersonal contact, order, and pay. Many economists argue

that raising the federal minimum wage would lead many business down a similar path. Forbes

contributor and former CEO of McDonalds, Ed Rensi, describes this push for automation in his

article. He says, In 2013 I and others warned that union demands for a much higher minimum

wage would force businessesto replace full-service employees with costly investments in self-

service alternatives. His concern was validated in 2016 when McDonalds announced a

nationwide roll-out of touch screen self-serve kiosks (Thanks to Fight for $15). It is
 Shadduck 5

undeniable that technology is beginning to creep into our daily lives. There are fully-autonomous

restaurants beginning to sprout up throughout the country. One of the better-known ones, Eatsa

has five restaurants in operation. It is an unlikely coincidence that all five locations are in states

that have embraced $15 minimum wage (Thanks to Fight for $15). However, incorporating

this type automation into a business is expensive. This means that companies who cannot afford

this are forced to make tough decisions regarding their future. Raising minimum wage would

begin a vicious cycle of job loss and eventually many businesses would be forced to close their

doors entirely.

Ed Rensi, cites California as a prime example of the impact of rising labor costs.

California is one of the first states to announce a plan to implement a $15 an hour minimum

wage (Gibson, Will Raising the Minimum Wage). Although this plan is obviously popular with

many living on minimum wage, the real cost is already beginning to be seen. Rensi cites that

nearly one-quarter of restaurant closures in the Bay Area cited labor costs as one of the reasons

for shutting down operations. (Thanks to Fight for $15). That is frightening. What would

happen to the national economy if the federal minimum wage was increased to a level like that of

California? Would your favorite mom and pop coffee shop be forced to close their doors? And

it does not end there. How would the owners of said coffee shop make ends meet? If the national

unemployment rate were to increase, there would be a surplus of qualified people seeking jobs,

thus hurting the owners odds of finding a new job. This domino effect could significantly affect

millions of people nationwide. Jeff Clemons an assistant professor of economics at the

University of California, San Diego studied the correlation between an increase in minimum

wage and the unemployment rate in the late 2000s. He says, I'm willing to take the stand that
 Shadduck 6

the full set of minimum wage increases enacted over this period is responsible for a decline of

around 1 million jobs (Soergel, Pay Wars).

The United States is not the only country struggling to make a decision regarding

minimum wage. A study published by Devanto Shasta Pratomo, an Indonesian economist,

researched the effect minimum wage had on youth employment. Studying the employment rates

of men and women, young and old. Pratomo concludes that although it differs between gender as

well as local environment, an increase in minimum wage decreases the probability of youth

being employed. (Pratomo, 252) Why might this be? If it is true that minimum wage increasing

leads to higher unemployment in general. A surplus of older, well qualified employees is looking

for a job. This means those teenagers who are just getting into the work force are likely placed

below those with more experience. While this study took place in Indonesia, I do not believe that

it is unrealistic to say it is likely true in the United States.

The real cost.

Many economists argue that the unemployment rate is not the only thing threatened by a

minimum wage increase. In the case of smaller businesses, ones with already slim profit margins,

even an increase of a dollar or two could skew the entire business plan. James Sherk, in his

report for The Heritage Foundation, cites that small business or fast food restaurants operate in

highly competitive markets. This means that the typical fast food restaurant makes around 3 to 5

cents on the dollar ($15 Minimum Wages). For a business to avoid failure it would be forced to

push that extra cost onto the customer. Sherk again argues that, typically an increase in price

would mean a business loses customers. However, in the case of federal minimum wage, the

entire fast food industry would have to raise their prices. Thus, the new, increased prices become

the competitive prices ($15 Minimum Wages). In Business Insider, Reihan Salam, cites similar
 Shadduck 7

reasons as Sherk. Salam argues that an increase in prices would affect almost everyone, not just

the rich. He says, But of course it will often be the poor people who pay them [higher prices],

particularly in poor states (Raising the Minimum wage). Meaning, even those who would

receive an increase in pay would be forced to pay higher prices for many things essential to daily

life. This leads many to conclude that even if minimum wage were to increase, the additional

costs of daily goods would keep the buying power around the same.

Is change necessary?

In short, yes something should change. It should not be the case that someone like Crystal

Dupont struggles to survive despite working full time. However, before we go out on the streets

and join the Fight for $15, I believe we should accept that $15 an hour is too much. An increase

to that degree is astronomically more than ever before. Although there is debate about the actual

number. Adjusting for inflation, the highest minimum wage was back in 1968, it was around

$10.80 in 2015 dollars (Rogers, Adjusted for Inflation). I am concerned that raising the

minimum wage too high would hurt our economy. High unemployment hurts the economy for

obvious reasons. However, less obvious is the effect price increases has on the economy. When

prices increase, everyone must be more conscious regarding where they spend their money.

When people are more conscious about their spending, non-necessities are typically left on the

shelves. If this were to happen, it would only lead to more business closing further adding to the

unemployment rate. Now, here is my proposition for increasing the federal minimum wage. I

believe that a minimum wage in the range of around $10 an hour is not unreasonable. However,

to protect the economy, it should be increased gradually. While the minimum wage is increasing,

if there seems to be a negative effect on the economy. The gradual increases should cease.

Therefore, setting a deadline like congress has proposed is not the best option. With a deadline,
 Shadduck 8

congress would be forced to continue the gradual increases regardless of the negative economic

impact. To conclude, increasing the minimum wage is necessary however increasing it too much

will likely hurt the economy.

 Shadduck 9

Works Cited

Allegretto, Sylvia, et al. Fast Food, Poverty Wages. Labor Center, University of California,
Berkley, 15 Oct. 2015, laborcenter.berkeley.edu/pdf/2013/fast_food_poverty_wages.pdf.
Accessed 5 Apr. 2017.

Gibson, Kate. Will raising the minimum wage to $15 an hour kill jobs? CBS News, CBS, 1
Apr. 2016, www.cbsnews.com/news/will-raising-minimum-wage-to-15-an-hour-kill-
jobs/. Accessed 5 Apr. 2017.

Kasperkevic, Jana. Congress to propose bill raising US minimum wage to $12 by 2020. The
Guardian, Guardian News and Media, 30 Apr. 2015, www.theguardian.com/us-
news/2015/apr/30/us-congress-democrats-minimum-wage-12-by-2020. Accessed 5 Apr.
2017.

Linn, Allison. By the grace of God: How workers survive on $7.25 per hour. NBCNews.com,
NBC Universal News Group, 6 Mar. 2013, www.nbcnews.com/feature/in-plain-
sight/grace-god-how-workers-survive-7-25-hour-v17195815. Accessed 5 Apr. 2017.

Pratomo, Devanto Shasta. How does the minimum wage affect employment statuses of youths?
Evidence of Indonesia. Journal of Economic Studies, vol. 43, no. 2, 30 July 2014, pp.
252274. EBSCO,
www.emeraldinsight.com.librarylink.uncc.edu/doi/pdfplus/10.1108/JES-07-2014-0131.
Accessed 5 Apr. 2017.

Rensi, Ed. Thanks To 'Fight For $15' Minimum Wage, McDonald's Unveils Job-Replacing Self-
Service Kiosks Nationwide. Forbes, Forbes Magazine, 4 Dec. 2016,
www.forbes.com/sites/realspin/2016/11/29/thanks-to-fight-for-15-minimum-wage-
mcdonalds-unveils-job-replacing-self-service-kiosks-nationwide/#319246524fbc.
Accessed 5 Apr. 2017.

Rogers, Kate. Adjusted for inflation, the federal minimum wage is worth less than 50 years
ago. CNBC, CNBC, 25 July 2016, www.cnbc.com/2016/07/21/adjusted-for-inflation-
the-federal-minimum-wage-is-worth-less-than-50-years-ago.html. Accessed 5 Apr. 2017.

Salam, Reihan. Raising the minimum wage to $15 an hour would hurt millions of vulnerable
people. Business Insider, Business Insider, 25 Apr. 2015,
www.businessinsider.com/raising-the-minimum-wage-to-15-an-hour-would-hurt-
millions-of-vulnerable-people-2015-4. Accessed 5 Apr. 2017.

Sherk, James. $15 Minimum Wages Will Substantially Raise Prices. The Heritage Foundation,
The Heritage Foundation, 19 Jan. 2017, www.heritage.org/jobs-and-labor/report/15-
minimum-wages-will-substantially-raise-prices. Accessed 5 Apr. 2017.
 Shadduck 10

Soergel, Andrew. Pay Wars. U.S. News & World Report, U.S. News & World Report, 28 Mar.
2016, www.usnews.com/news/the-report/articles/2016-03-28/ask-an-economist-will-a-
minimum-wage-hike-help-or-hurt-workers. Accessed 5 Apr. 2017.

U.S. average price of milk per gallon 1995-2016. Statista, Statista,

www.statista.com/statistics/236854/retail-price-of-milk-in-the-united-states/. Accessed 5
Apr. 2017.